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Hobby Lobby's Unintended Consequences

America's crazy, patchwork health-care system just took another hit.

By EZEKIEL EMANUEL

July 01, 2014

Which would you prefer: to have the ability to decide for yourself and your family the type of coverage you want to purchase on a health insurance exchange—and having your premiums subsidized by a defined contribution or voucher from your employer—or to cede that ability to your employer entirely, having them pick your insurance for you, but empowering them to decide, based on their personal religious beliefs, which services to cover and which to exclude?

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After Monday’s Hobby Lobby decision, this is exactly the type of choice that more and more Americans will face.

When considered in the light of the entire Affordable Care Act and the struggle to reform how health care is purchased and provided to patients, Hobby Lobby is simply not that big a deal. After all, it does nothing to change the individual mandate to have health insurance, the Medicaid expansion, the variety of programs to improve the quality of health care in the United States and those programs aimed at changing the payment system and thereby reduce costs, such as Accountable Care Organizations and other demonstration projects. These are all proceeding unaltered by this latest ruling.

The Supreme Court’s conservative majority, however, does seem to have added one more reason to doubt the wisdom of having employers be the main sponsors of health insurance in the United States.

Employer-sponsored health insurance arose in the United States due to an accident of history. During World War II, the federal government set wage and price controls to stabilize the economy and guard against wartime inflation. Health insurance benefits, however, were exempt from the controls. In 1954, Congress passed legislation that carried this exemption into taxation, so that in the second half of the twentieth century, employer contributions to health insurance would not be subject to income and payroll taxes. Most Americans, as a result, get their health insurance through their employer.

But health economists and experts across the political spectrum deplore this system. It promotes job lock, fuels health care inflation and keeps wages down. But after 60 years, it has become ingrained into the American economy.

To minimize disruption and reassure most Americans, the Affordable Care Act kept employer-sponsored health insurance intact. The ACA includes an employer mandate enforced by a $2,000 per worker penalty: Employers with more than 50 full-time workers who do not provide insurance that satisfies a minimum requirement must pay.

The minimum requirement includes preventive services from vaccinations to cancer screening tests to cholesterol screening. It also includes contraception. The Hobby Lobby case basically says employers need not cover contraception in the health insurance it provides.

The conservative majority carefully sculpted its decision. It specified that it applies only to “closely held” corporations, those in which five or fewer people own 50 percent of the shares. It specified, “This decision concerns only the contraceptive mandate and should not be understood to hold that all insurance-coverage mandates, e.g., for vaccinations or blood transfusions, must necessarily fall if they conflict with an employer’s religious beliefs.” Corporations can’t use this exemption as “a shield for employers who might cloak illegal discrimination as a religious practice,” according to the court.

But these limits are not as limiting as they seem. The closely held corporation limit is no limit at all. It turns out that more than half of U.S. employees work for closely held corporations. While many are small, many, like Hobby Lobby, are large. And it gives an incentive for more employers to become closely held corporations.

Ezekiel Emanuel is vice provost of the University of Pennsylvania and chairman of the Department of Medical Ethics and Health Policy. He also advised the White House on healthcare reform during the Obama administration.